Apparel manufacturers urge government to change loan repayment clauses to avoid being classified as NPA

NEW DELHI: Worried about dipping overseas demand, Indian apparel manufacturers have written to the government seeking reclassification of loans and extensions of sops and interest subsidies to cushion the pressure of volatile market conditions.

The concerns of exporters and other market stakeholders are likely to be discussed in the Board of Trade (BoT) meeting, chaired by commerce, industry and textiles minister Anand Sharma, later this month.

The Apparel Export and Promotion Council (AEPC), in its letter, has urged the government to extend the 2% interest subvention to the entire garment and knitwear sector and not limit it to the small and medium industry. The sector has witnessed 5% to 6% higher credit rates over the last few years in addition to volatility in foreign currencies, increase in yarn prices and recession in crucial markets.

Increasing number of garment units have been failing to pay back their loans and fear being classified as Non Performing Assets. AEPC, in its letter, has called upon banks to provide moratorium for a period of two years in term loan repayment as well as restructure their loans.

The BoT meeting will help finalise the expected Foreign Trade Policy (FTP). The council has also requested the commerce minister to give a scrip equivalent to 2% of export value of goods under the Focus Market Scheme to garment exports to Russia, South Africa, Brazil, South Korea, Japan and Australia for the year 2012-13. The scrip can be used to either import products duty-free to the extent of the value of the scrip or sold for cash. This would help the industry diversify beyond the traditional markets of the US and EU where demand is plumetting.